Disability's Deep Costs

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If Roy Grizzard has his druthers, business owners will be hearing a lot more about him in the next year. As the head of the Labor Department's new Office of Disability Employment Policy, Grizzard's job is, among other things, to increase employment among people on disability rolls.

Grizzard has his work cut out for him. Since 1984, the share of working-age Americans who are out of jobs and collecting Social Security Disability Insurance rose by more than 60%, to 5.6 million beneficiaries. Many low-skilled workers on disability are no longer looking for work, and thus aren't counted among the unemployed. MIT economist David Autor, who recently published a paper on the topic, predicts that in 10 years, one in 20 working-age Americans will be on SSDI. Today, that figure is one in 27.

This would be bad for the economy and bad for business. Currently, people on disability receive, on average, $772 a month from the federal government. To help defray costs as rolls swell, the government is apt to turn to business in the form of a substantial increase in payroll taxes, according to University of Chicago economist Mark Duggan, who co-wrote the paper with Autor. He thinks payroll taxes could jump in the next 10 years to 15% from the current rate of 12.4%.

Percentage of companies that employed one or more disabled workers in 2003: 26%

Grizzard believes the alarming trend is mainly due to America's 77 million baby boomers, who, as they age, are developing ailments and going on disability. Right now, the majority of SSDI recipients are 50 and older, according to the Social Security Administration. To make matters worse, says Autor, more people in their 40s are going on disability, so they're collecting benefits for a longer amount of time.

A major contributing factor, Autor notes, is the 1984 change in eligibility requirements giving more weight to pain and mental illness that limit the ability to function in the workplace. Previously, the top diagnoses for people on SSDI were cancer and heart problems, illnesses with high mortality rates; today they are low mortality ailments like mental disorders and back problems. "Because they don't give rise to symptoms, they're open to broader interpretation and, in some cases, abuse," he says. (Only 4% of cases are attributed to injuries sustained in or out of the workplace.)

Social security expects to pay out about $71 billion in disability benefits this year.

The government offers tax incentives to encourage businesses to hire disabled workers, but few take advantage of them, according to a recent report by Congress' General Accounting Office. That's where Grizzard comes in. Last fall, he started DisabilityInfo.gov, which provides info on employment, job accommodations, and assistance programs, and has instituted a toll-free referral service (866-327-6669) to match disabled job candidates with vacancies. But Autor believes stricter SSDI eligibility requirements are also necessary. Only Congress can make those changes, which probably means that the situation will have to get even worse before it gets better.